VW to Refrain From Raising Equity After Boosting Funds

Volkswagen AG outlined plans in November to invest 50.2 billion euros through 2015 on new models, additional plants and research and development. Photographer: Dado Galdieri/Bloomberg

June 17 (Bloomberg) -- Volkswagen AG plans to refrain from
using its stock to raise capital in the near future after
Europe’s largest automaker amassed 3.7 billion euros ($4.94
billion) in the last seven months by selling bonds convertible
into its preferred shares.

“We currently do not foresee any more equity-linked
issues,” VW Treasurer Joerg Boche said in an e-mail to
Bloomberg. “On the other hand, we have a significant volume of
refinancing of existing bonds and other financial instruments
and will continue to utilize the financial markets.”

VW, which targets a minimum net liquidity of 7 billion
euros to 8 billion euros and “feels comfortable” with 10
billion euros, expects to generate a positive net cash flow in
the automotive unit for the rest of the year, Boche said.
Liquidity at the automotive division fell 32 percent to 10.6
billion euros as of March 31.

VW today completed the sale of 1.2 billion euros in
convertible bonds to finance expansion that includes new plants
and taking full control of truck unit MAN SE. VW is setting up
new production sites and adding models to overtake General
Motors Co. and Toyota Motor Corp. as the world’s biggest
automaker by 2018. The German company, which already owns more
than 75 percent of MAN, is offering to buy out other investors.

The debt issue complements a similar financing move in
November, when VW sold 2.5 billion euros in convertible bonds.
Both included a coupon of 5.5 percent.

“Bonds have provided an attractive source of financing
recently,” Boche said. “However, we also finance ourselves
using syndicated bank loans, for example.”

Volkswagen outlined plans in November to invest 50.2
billion euros through 2015 on new models, additional plants and
research and development. The maker of VW, Audi and Lamborghini
cars plans to offset a contraction in the European market by
rolling out 60 new and updated vehicles, and expanding in the
premium segment, Chief Executive Officer Martin Winterkorn said
in April.

VW Acquisitions

The MAN takeover bid is part of VW’s strategy to become
Europe’s largest truckmaker by increasing cooperation between
the Munich-based company, Scania AB and its own commercial-vehicles unit. VW last year spent 4.5 billion euros to buy the
50.1 percent of the Porsche automaking business it didn’t
already own and 860 million euros to purchase Ducati motorbikes.

JPMorgan Chase & Co. was the sole bookrunner of the
convertible note sale.

“We believe in our ability to convince investors that
Volkswagen can continue to grow profitably, and hence we are
confident that our share price can rise sufficiently to make the
mandatory convertible a superior choice” over the company’s
other funding alternatives, Boche said.